Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[Sabre Man]

If new, is there a way to learn whether M3 buyers are trading in from older EVs, or ICE?

I created a poll in elbilforum.no some time ago to see what cars Model 3 buyers were coming from and got about 200 replies.

From memory, about 15% came from another Tesla, about 40% to 50% came from another EV while most of the others came from cheaper or similarly priced ICE cars.

 

[dgodfrey]

I wouldn’t worry about Elon losing a title. He’s already stated publicly he became “the nothing of tesla” and nothing happened. As long as he owns the most stock I think he’ll be calling the shots. Not unlike an underground government except as the nothing of tesla he’ll probably be able to tweet at will.

This brings up an interesting point. If he's stripped of any official title or capacity, can he tweet whatever he wants with no fear of sanction or punishment?

 

[Big Blue 1011]

Yeah, so I think this simple procedural order appears to have closed the door on most pathways for the SEC to win this case:

Tesla, TSLA & the Investment World: the 2019 Investors' Roundtable​

(Could be wrong though.)

What I meant by "simple procedural order" was the Order scheduling a hearing. In my neck of the woods, it is routine for the Court to hold a hearing on any motion in which a substantive (that would exclude specious) objection has been filed. As TNEVol has explained much more eloquently than me, a non-evidentiary hearing is an opportunity for both sides to make their arguments and respond to questions the Court may have. They can also respond to the points made by opposing counsel; somewhat akin to a debate.

But I'll go further regarding the importance attributed to the SEC's action. I could be very wrong about this, but I think the market has largely discounted the likelihood of a bad result for Elon and Tesla. The "around 500k" tweet was not the right one for the SEC to go to war over and its pleadings are unpersuasive to most objective observers.

In my view, the one weakness in Elon and Tesla's papers is the notion that the Consent Decree contemplated that Elon could be designated as the point person for determining in the first instance whether a tweet reasonably could be seen as containing material information. That's what got him into this mess in the first place. The SEC could have examined Elon under oath about the procedures that he put in place to determine what constitutes a material disclosure. We already know that he never sought pre-approval. What we don't know is if Tesla provided him with a checklist of topics to avoid, for example. Or whether the company provided him with examples of what not to tweet, etc. When the SEC declined to request an evidentiary hearing, it lost that opportunity and IMO basically conceded defeat.

I do expect the issue to be explored by the judge, however, and will not be surprised if the Consent Decree gets revised to require some consultation before tweeting about certain limited, but defined topics.

Once again, JMO.

 

[StarFoxisDown!]

Its the #TSLAQ motto: "Short Low, Cover High"

Short #1 - "Hey man, I just shorted more Tesla at 20% of the float"

Short #2 - "Hold my beer"

 

[Carl Raymond]

Tesla Gigafactory 3 Is Under Construction At Night Too: Video
Wow. Shanghai is not messing around.

Yep. Every time material drives onto that site, our share becomes a share of something bigger.

 

[mongo]

In my view, the one weakness in Elon and Tesla's papers is the notion that the Consent Decree contemplated that Elon could be designated as the point person for determining in the first instance whether a tweet reasonably could be seen as containing material information. That's what got him into this mess in the first place. The SEC could have examined Elon under oath about the procedures that he put in place to determine what constitutes a material disclosure. We already know that he never sought pre-approval. What we don't know is if Tesla provided him with a checklist of topics to avoid, for example. Or whether the company provided him with examples of what not to tweet, etc. When the SEC declined to request an evidentiary hearing, it lost that opportunity and IMO basically conceded defeat.

I do expect the issue to be explored by the judge, however, and will not be surprised if the Consent Decree gets revised to require some consultation before tweeting about certain limited, but defined topics.

We do know that Tesla said the Tweet was fine and non-material, and that the Expert witness said it was non-material, and that the Q4 call and ARK podcast back up his numbers as previously released.

In a case v Musk, Tesla is the standard for what is legit. In a case v Tesla, the judge would need to rule on the system in place.

If Elon is not able to determine if a Tweet could reasonably contain material information, then ALL of his tweets must be pre-reviewed, which runs into First Amendment issues They specifically rejected such a level of review during the settlement negotiations.

 

[Tslynk67]

@Lycanthrope Are you disagreeing that the Maxwell deal is dead on the water? I was genuinely asking.

Dan

Yes Dan, I think it's a done deal now judging from the things some have revealed in this forum.

 

[EVMeister]

I wonder how the kids react today when they see a Lamborghini or a Ferrari?

The smarter ones will realise they can accelerate the development of sustainable transport by pointing to the tailpipes and openly mocking the vehicle. Take away the cool factor of owning expensive pollution machines and the money will instead flow to top end, high margin EVs.

So tip for the kids: Shrug. Say “pity it’s not electric”. Walk on.

I'm an adult kid (early 30s) and my reaction is typically to sigh at the obnoxiously loud exhaust, shake my head and wonder to myself which twit owns or is driving the vehicle. I work with young uns (university students) and they don't tend to stare lustfully at such cars as they rip through the 30mph zones in town.

 

[neroden]

Don't see enough volume on MXWL for that: less than 10m shares traded this week, which is maybe 100k TSLA shares equivalent volume.

Here I'm assuming that the obvious arbitrage trade would be to buy ~100 MXWL shares for every TSLA share shorted.

Right?

About 57 MXWL per TSLA share, I think. So 175K TSLA shares equivalent volume. Good catch on how low the volume on MXWL has been.

 

[sparcs]

I do expect the issue to be explored by the judge, however, and will not be surprised if the Consent Decree gets revised to require some consultation before tweeting about certain limited, but defined topics.

this sounds similar to TNEVol's original comments that Elon may end up in some sort of technical violation without their being any major sanctions. Not a real win for anyone, but it's at least face saving for the SEC.

 

[humbaba]

Sorry, no. Any sort of display of emotions or support for any side, active or passive is strongly discouraged within federal courtrooms. Oral arguments are serious business and anything the lawyers say can make or break a case. Judges are neutral and don't want to be influenced and don't want to be perceived to have been influenced by anything than the law, facts and logic. Even if the case was "Anna Frank vs. Adolf Hitler", they'd strive to be impartial and professional.

So please behave.

So what you are trying to say is that I should go in with a shirt that says "#TSLAQ" under the image of flamethrowers burning dollar bills falling from Musk's hands?

More seriously, since the Norway numbers are what we have ready access to and so running the risk of implying gross generalizations, Nissan is the top EV seller in Norway with 56,838 between all models listed and holding close to a quarter of the EV market. Because Norway is small it is no real surprise that their steady state has plenty of variation, but extrapolating from Nissan's best year (2018) at ~13k units registered and taking the M3 registrations to date as being half a quarter (when it is still less than half a quarter, so this is conservative) Tesla would add ~44k units per year. There's a current gap of ~20k units with Tesla gaining by ~850 units/week. That gives 24 weeks for there to be as many Tesla's registered in Norway as there are Nissan EVs.

Using the YTD ~19k registrations and ignoring seasonal variation, projecting that gives ~76k new registrations this year. So at the end of 2019 there would be a total of ~300k accumulated registered vehicles, of which Nissan would account for ~22% and Tesla for ~26%.

Naturally, the rate of M3 registrations are reasonably expected to taper off at some point, but we also don't know when SR or SR+ will be made available in Europe. Regardless, it seems likely that the total number of Tesla's in Norway will outnumber any other single manufacturer at some point this year.

Even better, Norway may see ~36% growth in EV registrations this year.

 

[Oil4AsphaultOnly]

They gave samples to a bunch of companies. In the November 8 Q3 call they said they got good feedback with respect to degradation, etc. They didn't say they already had a partner.

Feedback indicated the process worked at pilot scale. They still needed to scale up their pilot line to prove they had a viable production process. They said (emphasis mine):​

"We have already initiated the scale-up of our pilot line, and we are preparing to accelerate investment immediately following the execution of a commercialization agreement with a new partner."

This is CEO-speak for "we're moving ahead slowly while trying to land a scale-up partner". They got cash in December by selling their high voltage product lines off, by which time they were in serious discussions with Tesla. I figure they put this cash toward scale-up in January or February. A year to get the scaled-up line working and prepare for commercial production sounds reasonable, if all goes well.

I agree with the reading of the CEO-speak. Maxwell wanted a partner that would fund the production line as well as be deeply "invested" in making the line work. Wouldn't a merger with Tesla solve both the speed of execution and cash problem?

I found Hieu Duong's paper: http://www.powersourcesconference.com/Power Sources 2018 Digest/docs/3-1.pdf

And in it is a picture of the spool of dry electrode material (NMC in this case). It sure does look like a pretty scalable product!

Maxwell had been working with an "automotive OEM and tier-1 supplier" since 2016: Maxwell Technologies And The Battery Race With Toyota - Maxwell Technologies, Inc. (NASDAQ:MXWL) | Seeking Alpha . So although Tesla might not have been the original partner, Maxwell has already spent years on developing this.

 

[Tslynk67]

Regarding above Elon "not a CEO" discussion. I also state Elon isn't going anywhere. First of all, I think he will not be held in contempt, but will be reminded by the judge to comply carefully, the judge may well admonish the SEC and consider clarification to the wording of the settlement - if such thing is allowed?

If, heavens forbid, the judge was to rule against and impose some draconian conditions, then Tesla could hire him as a janitor for the same compensation package. He could operate the same as he does today, just needs to carry a broom with him everywhere...

Now, I'm coming back to this option I bought, it was up 127% today at one point. Obviously at this moment, this is on speculation that the value of $TSLA may rise above the strike price by next Friday. This means, if I'm correct that if the SP doesn't continue to rise, the value will start to fall - this is what people refer to as "time value", is that correct?

I still see a lot of potential upside in the coming days and potential for a big pop with Q1 deliveries, but the potential to offload it with 100% profit is tempting:

 

[Pras]

It is really impressive how they short at the bottom and cover at the top, isn't it? They COULD have made a lot of money swing-trading, but instead...

While people (pretend to) disagree, investing is very personal and emotions are involved. The emotions lead to confirmation bias. The shorts surely took it personally when they rolled off the short position from solar city or when they have been hurt time and again.

So if you expect the shorts to start behaving rationally, you are wrong. They surely believe that Tesla is dying, that there is no demand, the cars are so bad that they will fall apart, and what not. To be honest, there is a strong belief that Elon will be sent to jail. So don’t expect them to close the short position and act like a tactical swing traders. Some may be, but not a whole lot.

To be fair one can say that we may be in the similar bubble of our own, except a key difference, a lot of us are Tesla car owners and we see the good and bad of Tesla first hand.

 

[ggr]

ETrade just raised the margin requirement on TSLA from 35% to 55%! This is insane?! They must really be buying into the short FUD to feel a need to do this.

 

[Krugerrand]

Nobody suggested we are scared to show our support. However, discretion is the better part of valor in many cases. I don't think we want the judge to feel pressured in any way.

Dan

You think the judge would feel pressured because a handful of Tesla supporters showed up in branded t-shirts? For real? A judge who spent time at The White House.

The only time discretion is better is when you’re trying not to get caught having an affair, doing something illegal/underhanded, or on the FBI’s most wanted list.

 

[Fact Checking]

What I meant by "simple procedural order" was the Order scheduling a hearing. In my neck of the woods, it is routine for the Court to hold a hearing on any motion in which a substantive (that would exclude specious) objection has been filed.

But scheduling an oral hearing was only half of the decision:

Order – #36 in United States Securities and Exchange Commission v. Musk (S.D.N.Y., 1:18-cv-08865) – CourtListener.com

ALISON J. NATHAN, District Judge:

Both parties have indicated that an evidentiary hearing is not required on Plaintiff's Motion for Order to Show Cause. Dkt. Nos. 34_35.

Accordingly, the Court will decide
Plaintiff's motion without an evidentiary hearing.

The Court Wili, however, hold oral argument, which is hereby scheduled for April 4, 2019 at 2:00 p.m.

SO ORDERED.​

The other half of the decision was to not hold an evidentiary hearing - which, while requested by both parties, was not just a procedural decision: the court is the "injured" party when a court order is disobeyed, so a contempt hearing could have been held with Elon testifying.

but I think the market has largely discounted the likelihood of a bad result for Elon and Tesla.

I disagree, short interest increased significantly, new lows were reached, analysts warned about the SEC downsides, social media is full of short trolls misleading about the case, 2025 bond yields have increased.

We already know that he never sought pre-approval

Elon never sought pre-approval because he consciously avoided all topics with material information. He effectively applied self-censorship in an attempt to avoid conflict with the SEC.

Here is Elon's sworn affidavit:

Affidavit Declaration of Elon R. Musk – #27, Att. #9 in United States Securities and Exchange Commission v. Musk (S.D.N.Y., 1:18-cv-08865) – CourtListener.com

"7. I have taken my obligation to comply with the Order and the Policy seriously. Among other things, I have dramatically decreased the amount that I tweet about Tesla. Compared to the months of May, June, and July 2018, during the three months following the entry of the Order (November and December 2018 and January 2019), I have cut my average monthly Tesla-related tweets nearly in half. This is not because I am concerned about non-compliance, but rather because I want to err on the side of caution to avoid unnecessary disputes with the SEC. I have also taken steps to ensure that, when I do tweet information, I am compliant with the Order and the Policy. The Disclosure Counsel and other members of Tesla’s legal department have reviewed the updated controls and procedures with me on multiple occasions. With my knowledge and approval, Tesla’s General Counsel and Disclosure Counsel have been reviewing all tweets promptly in real time upon publication to double-check compliance with the Policy and to ensure that any errors are caught and rectified quickly. Additionally, since the entry of the Order and the enactment of the Policy, I have not tweeted information that I believe is, or could reasonably be, material."​

The suggestion that Elon didn't strive to maximally comply with the settlement is absurd.

But yeah, I can already see shorts pivoting to a new "if Elon wins the case no big deal" talking point, downplaying the significance of an eventual win over the SEC in the lawsuit.

 

[lklundin]

I'm quite sure some of the "special sauce" comes from JB, and some from Franz. Though certainly very important parts (specifically the focus on cost reduction) come from Elon.

Having looked at footage from Tesla's early days, I think Elon Musk's strength is also to - repeatedly - motivate his employees to make an extra effort. He is reputedly very demanding, using himself to set the bar.

That, and his first principle's approach - and also his ability to learn from his own mistakes, I think are qualities not often found in others.

 

[Krugerrand]

I have never seen a federal court judge react to the appearance/choice of clothing attire of a member of the gallery. Conversations among participants, no matter how hushed the tone, are another matter. They are seldom tolerated, even among members of the bar. Outbursts of any kind, whether in support, opposition, or just spontaneously in response to a point made in oral argument, will likely result in removal from the courtroom. That is what courtroom deputies and the members of the US Marshall service are for and they take their jobs quite seriously.

Exactly.

But the people who will take notice are those from the SEC, Elon’s representatives and the media. And there’s not a thing wrong with letting them know where people stand by a large presence in that courtroom.

 

[Big Blue 1011]

If Elon is not able to determine if a Tweet could reasonably contain material information, then ALL of his tweets must be pre-reviewed, which runs into First Amendment issues They specifically rejected such a level of review during the settlement negotiations.

That's simply not true. Focus on the word "reasonably". Lay out all of Elon's tweets over the last year and the vast majority of them could be separated into "material" or "not material" without serious (again, excluding specious) disagreement. No one would expect Elon to submit those for review.

What you are left with is a relatively small number of tweets that fall into the gray area. May be material. May not be material. Who knows? Under the consent decree, those tweets should have been submitted for approval. And I say that even if the reviewer OK'd every one verbatim.

The "$420 funding secured" tweet was a big deal, even though Elon didn't think so at the time. A system was set up to protect him as much as shareholders. That requires some degree of caution going forward, if not an abundance.

But it doesn't mean every tweet, or anything close to it.